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THE    STORY 

OF  THE 

UNITED   STATES   GRAIN 
CORPORATION 


APRIL    5,    1920 


42    BROADWAY 
NEW  YORK 


THE  STORY  OF  THE 
UNITED  STATES  GRAIN  CORPORATION 

1.  WHY  THERE  Is  A  GRAIN  CORPORATION. 

In  August,  1917,  when  the  United  States  was  beginning, to  take 
stock  of  its  national  resources  and  really  began  in  earnest  to  concen- 
trate its  energies  upon  the  enormously  difficult  task  of  winning  the 
war,  the  President  was  authorized  by  Congress,  after  several  months 
of  discussion,  to  establish  agencies  to  stimulate  the  production  of 
food  and  fuel  and  to  control  their  distribution.  The  Food  Adminis- 
tration had  already  been  organized  by  Herbert  Hoover  and  it  was  now 
promptly  set  in  motion.  Within  four  days  of  the  passage  of  the  Act 
by  Congress  the  Food  Administration  Grain  Corporation  was  organised 
for  the  purpose  of  controlling  the  wheat  supply  of  the  United  States. 

2.  THE  NEED  FOR  DOING  SOMETHING.  * 

There  was  high  need  of  such  an  undertaking.  For  two  years  the 
United  States  had  harvested  dangerously  short  wheat  crops.  In  place 
of  the  bountiful  harvests  of  1914  and  1915,  which  had  permitted  an 
export  of  nearly  600  million  bushels  of  wheat  and  over  43  million  bar- 
rels of  flour  between  July,  1914,  and  June,  1917,  the  crops  of  1916  and 
1917  were  not  greatly  over  600  million  bushels  each.  Not  only  were 
the  crops  far  below  par  but  the  frantic  bidding  of  the  Allied  buyers 
and  the  frightened  consumers  of  our  own  country  had  carried  the 
price  of  wheat  in  May,  1917,  to  the  highest  point  ever  known  in  this 
country — $3.45  per  bushel  at  Chicago.  The  average  wholesale  price 
of  spring  wheat  flour  at  Minneapolis  during  the  same  month  was 
$14.88  per  barrel,  and  at  one  time  went  to  $16.75.  The  wheat  market 
was  in  a  state  of  chaos,  with  the  ordinary  machinery  of  the  grain  trade 
almost  entirely  dislocated  and  the  normal  milling  production  of  the 
country  so  greatly  reduced  that  there  was  a  dangerously  low  level  of 
flour  reserves  as  well  as  a  shortage  of  wheat  at  the  terminals.  A  deplor- 
able condition  of  speculation  existed  in  practically  every  branch  of  the 
trade — speculation  in  the  sense  that  the  risks  of  business  were  so  great 
that  dealers  had  to  ask  excessively  wide  margins  in  order  to  protect 
themselves.  Of  course,  these  wide  margins  were  passed  along  to 
the  buyer  and  fpom  him  in  turn  to  the  consumer.  With  only  62  million 
bushels  of  wheat  on  hand  at  the  first  of  July — barely  enough  to  fun  the 
flour  mills  for  a  month — and  an  estimated  new  crop  of  only  637  million 
bushels  harvested  in  July  and  August,  there  was  obviously  a  pressing 
necessity  for  some  strong  agency  of  control.  Speculation  had  to  be 
stopped,  exports  curtailed,  prices  stabilized,  confidence  restored,  and 


production  ^tfrtiiilatedTo'Vcftrietliing  like  a  normal  basis.  This  was  the 
job  of  the  Food  Administration  and  of  its  most  important  agency,  the 
Grain  Corporation. 

3.  WHAT  THE  GRAIN  CORPORATION  Is. 

The  Grain  Corporation  was  incorporated  under  the  laws  of  Dela- 
ware; its  entire  capital  stock  (originally  $50,000,000)  is  owned  by  the 
United  States;  it  has  seven  directors  appointed  by  the  President;  its 
headquarters  are  in  New  York,  under  the  direction  of  Julius  H.  Barnes, 
President;  for  purposes  of  administration  the  United  States  was 
divided  into  fourteen  Zones  and  each  Zone  placed  in  charge  of  a  vice- 
president  as  Zone  Agent  or  regional  director. 

4.  WHO  RUNS  IT. 

These  officers  are  all  experienced  and  conspicuously  successful 
grain  men,  the  business  leaders  of  their  respective  communities.  They 
served  during  the  two  years,  from  August,  1917,  to  June,  1919,  as 
volunteers,  without  a  dollar  of  salary.  This  was  the  example  set  by 
Mr.  Hoover  himself  and  his  lieutenants  in  the  conduct  of  the  Grain 
Corporation  enlisted  for  the  war  upon  the  same  terms.  Not  only  so, 
but  these  men  completely  dissociated  themselves  from  their  private  bus- 
iness interests  in  the  grain  trade  with  which  their  duties  as  public 
officials  might  conflict,  and  have  at  great  personal  sacrifice  devoted 
themselves  to  the  public  service  in  a  fine  spirit  of  practical  idealism. 
One  cannot  understand  the  Grain  Corporation  or  what  it  has  meant 
in  the  public  and  commercial  life  of  this  country  during  the  past  two 
and  a  half  years  unless  one  tries  to  comprehend  something  of  the  spirit 
in  which  it  was  organized  and  the  ideals  with  which  it  approached 
its  task. 

5.  WHAT  THE  PROBLEM  WAS. 

This  task  was  the  difficult  problem  of  making  700  million  bushels 
of  wheat  feed  the  people  of  the  United  States,  provide  seed  for  the 
new  crop,  and  supplement  the  inadequate  food  supplies  of  our  Allies 
in  the  war.  Not  only  must  our  own  people  be  fed,  but  we  were  eating 
at  a  common  table  with  the  Allies  and  we  had  to  divide  our  loaf  with 
them,  scant  as  it  might  be.  It  was  also  imperative  to  secure  to  the  wheat 
producers  of  this  country  a  fair  price  for  their  grain  and  at  the  same 
time  to  reduce  flour  and  bread  prices  to  the  consurning  public.  In 
order  to  stimulate  wheat  planting  Congress  had  established  a  minimum 
price  of  $2.00  per  bushel  for  the  crop  of  1918 ;  obviously  the  fair  price 
to  the  producer  for  the  1917  crop  could  not  be  less  than  this ;  it  was 
equally  obvious  that  it  could  not  be  allowed  to  remain  at  the  high 
prices  current  in  the  summer  of  1917. 


6.  WHAT  THE   FARMERS   WANTED^*  .•,'•',  ;.,::''•.•'  ;'•'.'.  '•  •  '.  ( •  \ 

It  should  be  clearly  understood  that  the  Food  Act,  passed  by  Con- 
gress in  August,  1917,  contained  no  reference  to  the  crop  of  1917 
or  its  price.  There  was  nothing  in  the  Act  itself  authorizing  any  buy- 
ing basis  for  government  purchases,  and  there  was  absolutely  no  au- 
thorization to  the  President  or  anyone  else  to  "fix"  the  wheat  price 
which  should  govern  the  prices  to  be  paid  in  every-day  transactions  by- 
individuals.  It  was  necessary,  -however,  that  some  element  of  stability 
should  exist  in  the  wheat  market  and  the  best  way  to  bring  this  about 
was  to  establish  a  fair  buying  basis  for  government  purchases  and  to 
induce  other  buyers  to  pay  the  same  price.  But  what  was  a  "fair" 
price?  The  farmers  of  the  Southwest  who  had  sold  some  of  their 
1917  crop  at  prices  around  $2.50  per  bushel  held  out  for  a  price  at 
least  that  high ;  they  were  backed  up  by  the  whole  agricultural  interest 
of  the  Northwest  which  had  seen  the  price  of  spring  wheat  pass  the 
$3.00  mark  at  Minneapolis — before  harvest.  Naturally  these  interests 
were  opposed  to  any  reduction  in  the  wheat  price. 

7.  THE  PROBLEM  OF  THE  CONSUMER. 

On  the  other  hand  the  bread  consumers  of  the  country  had  to  be 
considered.  It  could  not  soon  be  forgotten  that  the  soaring  prices  of 
flour  and  bread  in  the  spring  of  the  year  had  led  to  bread  riots  in  New 
York  and  the  other  eastern  cities.  Those  consumers  who  could  afford 
to  were  hoarding  flour  while  those  who  could  not  were  clamoring  for 
a  reduction  in  the  cost  of  living.  With  the  lukewarm  attitude  of 
many  persons  at  that  time  towards  the  participation  of  the  United 
States  in  the  war,  there  were  plenty  of  people  who  were  more  anxious 
to  stir  up  antagonism  against  alleged  profiteers  than  against  the  public 
enemy.  The  United  States  was  a  hotbed  of  incipient  strikes  and  labor 
disorders  in  the  summer  of  1917  growing  out  of  mounting  prices  and 
high  living  costs.  If  there  had  been  no  prospect  of  lower  food  prices, 
no  curb  upon  speculation,  the  temper  of  the  industrial  population 
might  easily  have  broken  out  in  an  upheaval  which  would  have  para- 
lyzed the  whole  national  effort  in  prosecuting  the  war.  It  was  posi- 
tively necessary  that  some  relief  be  given  to  our  people  if  the  public 
morale  was  to  be  sustained  and  a  united  front  presented  to  the  enemy. 
While  the  farmers  were  holding  out  for  $2.50  or  $3.00  wheat  the 
representatives  of  the  consuming  interests  clamored  for  a  reduction 
to  a  $2.00  basis  or  even  less. 

8.  THE  WAY  OUT. 

This  situation  obviously  called  for  some  sort  of  compromise  be- 
tween the  extremists  on  both  sides,  and  the  President,  therefore,  ap- 


pointed' i  .Faif  PHQ«  <3Qnvpjitee40f  eleven  men  representing  all  interests 
which  should  determine  a  fair  buying  basis  for  government  purchases. 
After  prolonged  consideration  this  Fair  Price  Committee,  six  of  whom 
represented  the  farming  interests,  recommended  at  the  end  of  August, 
1917,  a  price  of  $2.20  per  bushel,  Chicago  basis.  This  price  was 
accepted  by  the  President  in  the  hope  that  it  would  "  at  once  stabilize 
and  keep  within  moderate  bounds  "  the  price  of  wheat  for  all  trans- 
actions throughout  the  crop  year  and  in  consequence  the  prices  of  flour 
and  bread  also.  This  expectation  was  fully  realized. 

9.  PUTTING  A  STOP  TO  SPECULATION. 

Storage  of  wheat  and  flour  was  limited  to  a  period  of  30  days,  thus 
making  it  impossible  for  any  one  to  hoard  or  speculate  successfully  in 
these  prime  foodstuffs;  the  flour  mills  were  forbidden  to  make  con- 
tracts calling  for  delivery  more  than  30  days  ahead,  thereby  prevent- 
ing the  possibility  of  speculation  in  flour  contracts ;  and  the  grain 
exchanges  were  required  to  suspend  absolutely  for  the  period  of  the 
war  all  operations  in  future  contracts  for  wheat. 

10.  WHAJ  THE  GRAIN  CORPORATION  DID. 

The  Grain  Corporation  was  made  the  sole  agency  for  all  govern- 
ment buying  and  it  at  once  entered  into  a  series  of  voluntary  agree- 
ments with  flour  mills  and  country  elevators  to  maintain  the  govern- 
ment fair  price  basis  in  their  own  purchases  throughout  the  crop 
year  1917-18.  These  buyers  of  wheat, — including  some  3,000  mills 
and  14,000  elevators, — agreed  to  pay  for  wheat  of  the  1917  crop  the 
government  fair  price,  less  freight  to  terminals  and  handling  charges, 
and  no  more,  so  that  the  farmers  everywhere  should  receive  the  fair 
reflection  of  the  government  buying  basis.  Through  these  trade 
agreements,  which  embraced  about  two-thirds  of  the  elevators  and 
by  far  the  preponderance  of  the  flour  milling  capacity  of  the  country, 
as  well  as  through  its  own  purchases,  running  to  nearly  30  million 
bushels  of  wheat,  the  Grain  Corporation  made  effective  the  fair  price 
on  the  crop  of  1917. 

11.  .  THE  TRADE  AGREEMENTS. 

The  inducements  to  enter  into  these  agreements  were  primarily  the 
assurance  by  the  Grain  Corporation  to  protect  the  mills  and  elevators 
from  any  loss  on  their  unsold  stocks  of  wheat  or  flour  resulting  from 
any  possible  decline  of  the  price  below  the  government  fair  price 
basis.  Submarine  activity  and  the  shrinkage  of  ocean  tonnage  had 
dammed  back  in  other  parts  of  the  world  a  mass  of  wheat  which,  if 
released  in  the  event  of  an  early  peace,  would  have  flooded  the  world's 
markets  and  broken  prices  everywhere.  Hence  it  was  necessary  to 


guarantee  our  mills  and  elevators  against  such  loss.  The  assurance 
by  the  Grain  Corporation  was  a  better  protection  than  any  hedge  on 
a  board  of  trade  could  have  been.  The  Grain  Corporation  also  under- 
took to  pay  a  fair  storage  charge  to  the  "  agreement "  elevators 
in  return  for  which  it  got  the  right  to  direct  or  divert  their  wheat 
shipments  to  such  points  as  seemed  to  it  best — the  theory  being  that 
the  government  through  the  agency  of  the  Grain  Corporation  con- 
trolled the  movement  of  the  wheat  crop,  whether  it  actually  bought 
the  grain  or  not. 

12.  ALLOTTING  THE   WHEAT. 

In  order  to  secure  to  each  mill  its  fair  quota  in  the  allotment  .of 
wheat,  the  Grain  Corporation  agreed  to  apportion  the  existing  supply 
among  the  mills  in  proportion  to  their  respective  capacity  as  measured 
by  their  average  output  during  the  three  years  1914,  1915,  1916.  In 
return  for  its  services  in  maintaining  an  adequate  supply  of  wheat, 
and  to  cover  expenses  of  administration,  the  Grain  Corporation  was  to 
receive  from  each  mill  a  fee  amounting  to  1%  of  the  value  of  the 
wheat  supplied. 

13.  REGULATING  THE  MILLER'S  PROFIT. 

What  steps  were  taken  to  reflect  the  fair  wheat  price  through  the 
flour  mills  and  the  distributing  trades  to  the  consuming  public  with- 
out actually  fixing  flour  prices  ?  Congress  had  not  authorized  any 
direct  price  fixing.  Therefore  an  ingenious  plan  was  devised  to  carry 
the  reduced  wheat  price  through  to  the  consumer  by  requiring  the  mills 
to  sell  their  flour  at  a  net  profit  not  to  exceed  25  cents  per  barrel  above 
their  cost  of  production.  All  the  flour  mills  were  placed  under  license 
by  the  Food  Administration  and  were  required  under  pain  of  forfeit- 
ing their  licenses  to  observe  this  profit  regulation. 

14.  FIXING  THE  MIDDLEMAN. 

The  wholesale  and  jobbing  trades  were  also  licensed  and  definite 
trade  margins  were  prescribed  for  flour  as  well  as  for  other  commod- 
ities. Under  these  regulations  the  gross  margin,  or  difference  between 
the  buying  price  and  selling  price,  for  flour  jobbers  for  instance,  was 
fixed  at  75c.  per  barrel.  This  margin  had  to  cover  all  expenses  of  oper- 
ation— unloading,  warehousing,  local  delivery,  discounts,  and  collec- 
tions. All  food  commodities  were  required  to  be  moved  in  as  direct 
a  line  as  possible  from  producer  to  consumer  and  resales  within  the 
trade  (that  is,  from  one  jobber  to  another  jobber  or  from  one  broker 
to  another  broker)  were  strictly  forbidden.  As  small  a  toll  of  profit 
was  permitted  in  the  distribution  of  food  products  as  was  consistent 
with  preserving  the  necessary  facilities  of  trade. 


15.  HoW**Tb    CrfN'TR-OL*  Yrf r  £L'f AILER. 

The  one  weak  point  in  this  chain  of  regulation  was  the  lack  of  power 
to  control  the  prices  and  profits  of  the  small  retailers  who  distribute 
by  far  the  great  bulk  of  their  food  supplies  to  the  American  people. 
The  Food  Control  Act  did  not  include  the  power  to  regulate  retail 
dealers  doing  a  smaller  business  than  $100,000.00  a  year.  Obviously 
this  permitted  the  great  majority  of  retailers  to  go  uncontrolled.  An 
effort  was  made  to  meet  the  difficulty  presented  by  this  situation 
through  the  publication  in  every  community  of  retail  "fair  price  lists" 
by  the  local  Food  Administrators  who  formed  the  point  of  contact 
between  the  national  Food  Administration  and  the  great  mass  of  the 
people.  These  fair  price  lists  had,  of  course,  no  legal  standing  and 
no  action  could  be  taken  under  the  law  against  any  dealer  who  chose 
not  to  observe  these  fair  prices,  because,  as  has  just  been  said,  Con- 
gress did  not  authorize  control  of  retail  prices  or  practices  and  had 
provided  no  penalties  for  enforcement.  However,  the  publication  of 
the  fair  price  lists  did  serve  the  useful  purpose  of  calling  to  the  public 
attention  prices  which  afforded  the  retailers  an  ample  margin  to  do 
business  and  which  were,  in  view  of  all  considerations,  as  fair  as  could 
be  devised.  They  were,  of  course,  subject  to  frequent  revision  to  meet 
changing  conditions  of  costs  and  supply. 

16.  How  IT  WORKED. 

A  very  short  time  elapsed  between  the  establishment  of  the  fair 
wheat  price  and  a  return  to  conditions  more  nearly  approaching  sanity 
in  the  flour  trade.  Of  course,  flour  prices  had  already  begun  to  decline 
upon  the  enactment  of  the  Food  Control  Act,  when  it  was  clearly  seen 
that  some  regulation  would  be  imposed.  By  the  end  of  September 
wholesale  flour  prices  had  been  brought  into  line  with  the  fair  wheat 
price  and  through  the  greater  part  of  the  bitter  and  anxious  winter  of 
1917-18  wheat  and  flour  prices  remained  practically  unchanged  on  the 
basis  of  the  fair  price  established  by  the  President's  Committee. 

17.  TEN  DOLLAR  FLOUR. 

This  was  a  welcome  relief  for  flour  buyers.  In  Minneapolis  the 
standard  patents  which  had  sold  in  May,  June,  July,  and  August  at 
prices  averaging  considerably  above  $13.00  per  barrel  could  in  the 
last  three  months  of  the  year  be  had  for  not  much  over  $10.00  per 
barrel.  When  the  rules  requiring  a  higher  percentage  of  milling  extrac- 
tion were  put  into  effect  at  the  end  of  1917,  in  order  to  make  our 
meager  stock  of  wheat  go  as  far  as  it  would  in  the  production  of  whole- 
some flour,  the  price  was  still  further  reduced.  This  was,  of  courses 
reflected  in  the  retail  prices  of  flour  to  the  consuming  public!  Accord- 
ing to  the  Bureau  of  Labor  Statistics  the  average  retail  price  of  flour 


in  the  United  States  in  May,  1917,  was  8.7  cents  per  pound;  in  June, 
July,  August,  and  September  the  average  figure  was  7.5  cents ;  during 
the  last  three  months  of  the  year  it  had  declined  to  6.8  cents,  and 
through  the  whole  of  1918  it  was  still  less.  This  achievement  of  the 
Food  Administration  and  of  the  Grain  Corporation  was  accomplished 
without  legal  power  to  establish  and  fix  any  prices  which  should 
govern  the  public.  Instead  it  was  achieved  through  giving  direction 
to  the  usual  commercial  influences  of  supply  and  demand,  and  even 
more  through  the  thousands  of  voluntary  agreements  which  the  Grain 
Corporation  had  negotiated  with  wheat  buyers  everywhere  to  be 
governed  by  the  fair  price  basis.  By  making  the  government  price 
effective  everywhere  throughout  the  crop  year  the  Grain  Corporation 
restored  certainty  and  stability  in  the  place  of  commercial  chaos. 
The  farmer  got  a  fair  price  for  his  wheat  and  the  consumer  paid  only 
a  fair  price  for  his  flour.  By  agreeing  to  abide  by  the  fair  wheat 
price  the  mills  and  elevators  rendered  a  valuable  public  service ;  in  only 
a  few  isolated  localities  did  the  mills  deliberately  set  out  to  bid  up 
the  price  of  wheat  and  seek  to  advantage  themselves  by  increasing  the 
scope  of  their  individual  businesses  at  the  expense  of  the  community. 

18.  KEEPING  OUR  PROMISE  TO  THE  NATION  OF  LAFAYETTE. 

The  result  was  that  we  had  reasonable  prices  to  our  own  people; 
no  one  went  hungry  in  this  country  and  we  kept  our  pledge  to  our 
Allies.  Out  of  a  crop  which  was  less  even  than  our  normal  require- 
ments for  food  and  seed  we  exported  110  million  bushels  net  of  wheat 
and  flour.  Only  the  splendid  spirit  of  the  American  people  and  the 
genius  for  practical  organization  of  the  United  States  Food  Administra- 
tion made  possible  this  magnificent  performance.  There  was  not  wheat 
enough  to  give  everyone  his  full  bread  ration,  but  everyone  had  an 
equal  chance  to  practice  self-denial  and  to  supplement  his  quota  of 
wheat  flour  with  substitute  grains.  Each  one  knew  that  his  voluntary- 
saving  of  wheat  bread  helped  make  possible  a  tolerable  loaf  to  our 
brothers  in  arms  "over  there"  whose  thin  lines  were  holding  the 
trenches  until  the  strength  of  America  could  be  effectively  mobilized 
and  thrown  into  the  fray.  It  was  the  voluntary  self-denial  of  millions 
of  Americans  which  sustained  the  morale  of  our  Allies  through  those 
darkest  days  of  the  war. 

19.  OPPOSITION  AND  OBSTACLES. 

Do  not  let  anyone  think  that  the  practical  details  of  regulation  which 
realized  so  inspiring  an  outcome  were  either  simple  to  devise  or  easy 
to  administer.  At  every  turn  they  ran  counter  to  the  self  interest  and 
commercial  traditions  of  thousands  of  business  men  who  saw  their 
opportunities  for  profit  abridged,.  Be  it  said  to  their  credit  that  in 


8 

ninety-nine  cases  out  of  a  hundred  they  lent  whole  hearted  support  to 
the  policies  of  regulation  and  placed  the  public  interest  above  private 
gain.  Over  large  sections  of  the  community  there  was  bitter  resent- 
ment on  the  part  of  some  farmers  who  maintained  that  the  reduction 
of  the  wheat  price  had  cheated  them  of  legitimate  returns  for  their 
labor.  But  it  would  be  a  mistake  to  assume  that  the  curtailment  of 
their  possible  profits  which  the  wheat  producers  had  to  pocket  reacted 
unfavorably  to  their  real  interests  or  was  prejudicial  to  the  nation. 
The  conditions  prevailing  in  the  spring  and  summer  of  1917  were 
wholly  abnormal  and  it  would  have  been  unreasonable,  not  to  say 
pitifully  selfish  and  unpatriotic,  for  anyone  to  have  expected  or  de- 
manded their  continuance.  From  July,  1916,  to  August,  1917,  all 
through  the  year  succeeding  the  short  harvest  of  1916,  wheat  and 
flour  prices  had  been  mounting  almost  steadily  and  uninterruptedly. 
Everyone  with  wheat  or  flour  to  sell  had  shared  in  the  gains,  though 
unequally,  of  course.  With  the  establishment  of  profit  regulations 
millers  and  flour  jobbers  had  to  content  themselves  with  smaller  mar- 
gins and  diminished  gains.  But  this  was  only  right  and  fair;  their 
risks  were  less.  The  nation  was  at  war,  and  no  man  had  a  right  to 
take-  one  cent  of  profit  over  and  above  the  amount  necessary  to  keep 
him  in  business.  So  with  the  farmers.  No  patriotic  man  can  sympa- 
thize with  the  plaint  that  had  there  been  no  regulation  the  farmer  could 
have  sold  his  wheat  in  1917  for  $5.00  a  bushel.  Perhaps  he  might,  but 
at  what  a  cost  to  the  whole  world,  himself  included !  The  orgy  of  pri- 
vate speculation  in  all  trades  which  would  have  followed  the  absence 
of  regulation  would,  with  the  acute  distress  of  high  prices,  have  engen- 
dered social  and  industrial  unrest  that  would  have  paralyzed  our  war 
effort  and  in  the  end  have  beat,  with  intense  antagonism,  at  the  door 
of  every  farmhouse. 

20.     THE  GUARANTEED  PRICE  STIMULATED  WHEAT  PRODUCTION. 

The  stabilization  of  the  wheat  price  at  $2.20,  Chicago  basis,  re- 
sulted in  putting  more  money  into  the  farmers'  pockets  in  1917-18  than 
they  had  ever  received  for  a  wheat  crop  for  the  simple  reason  that 
they  were  not  at  the  mercy  of  a  fluctuating  market.  The  practical 
/  assurance  of  at  least  the  same  price  for  the  1918  crop  had  already  stimu- 
lated the  planting  of  42,301,000  acres  of  winter  wheat  in  the  fall  of 
1917.  The  announcement  by  the  President  on  February  21,  1918, 
that  the  fair  price  of  $2.20  would  be  continued  as  the  guaranteed 
minimum  for  the  crop  to  be  harvested  in  1918  resulted  in  bringing 
under  wheat  22,489,000  more  acres — in  the  spring  wheat  states  of  the 
Northwest— making  a  total  of  64,790,000  acres,  the  largest  acreage 
the  country  had  ever  seen. 


TABLE  SHOWING  RELATION  BETWEEN  SEASON'S  WHEAT  PRICE 
AND   NEXT   SEASON'S    PLANTING   OF  WHEAT. 


Crop  Year. 

Production, 
in  Million 
Bushels. 

Guar- 
anteed 
Price  : 
Chicago 
Basis. 

Average 
Farm 
Price 
Dec.  1. 

Total 
Farm  Value 
Dec.  1. 

Next  Year's 
Planting, 
in  Acres. 

1913-14  

763 

$0  80 

$610,122000 

54,499,000 

1914-15  

891 

99 

878  680  000 

61260000 

1915-16        

1012 

92 

942,303  000 

57,054,000 

1916-17  

640 

1.60 

1  023  765  000 

59  573,000 

1917-18. 

637 

$2.20 

2  01 

1278112000 

64  790,000 

1918-19.       .       .   . 

921 

2  26 

2.04 

1,881,826,000 

73,827,000 

1919-20 

941 

2  26 

2  1-5 

2  024  008  000 

21.  THE  CROP  OF  1918. 

In  June,  1918,  the  railroads  were  granted  a  general  25  per  cent, 
advance  in  freight  rates  and  the  guaranteed  price  in  all  market  centers 
was  increased  six  cents  per  bushel  in  order  that  the  freight  advance  ' 
might  not  fall  solely  on  the  farm  price.  The  planting  of  the  enormous 
acreage  of  64,790,000  acres,  stimulated  by  the  guarantee  and  the  patri- 
otic exertion  of  hundreds  of  thousands  of  farmers  in  the  hour  of  their 
country's  need,  resulted  in  the  production  in  1918  of  the  huge  crop  of 
921  million  bushels. 

22.  SUSTAINING  THE  MARKET. 

The  pressure  of  this  enormous  crop  demonstrated  the  absolute 
necessity  of  a  guaranteed  price  if  the  market  was  to  be  sustained  and 
the  farmer  to  realize  his  expectations.  Not  once  during  the  eight 
months  from  July,  1918,  to  February,  1919,  did  the  Chicago  open  /^ 
market  price  for  No.  1  Northern  spring  wheat  exceed  $2.35  per 
bushel, — only  nine  cents  over  the  guarantee,  and  through  practically 
the  whole  of  that  period  the  large  primary  market  receipts  kept 
the  price  down  to  the  guaranteed  minimum.  Only  the  purchases  of 
the  Grain  Corporation  during  this  crop  year,  amounting  to  some  268 
million  bushels  of  wheat  and  26  million  barrels  of  flour — equivalent 
to  almost  400  million  bushels  of  wheat  in  all— kept  the  price  up  to 
the  guarantee.  Had  the  buying  power  of  the  Grain  Corporation 
been  withdrawn  from  the  market,  even  temporarily,  there  would  un- 
questionably have  been  a  severe  slump  in  the  price,  to  the  injury  of  our 
farmers  everywhere.  A  lower  level  once  established  under  crop  mov- 
ing pressure,  the  guarantee  basis  might  not  have  been  again  recovered. 

23.     FINANCING  A  400  MILLION  BUSHEL  WHEAT  PURCHASE. 

At  the  beginning  of  the  crop  year  1918-19  the  resources  of  the 
Grain  Corporation  were  seen  to  be  totally  inadequate  to  the  task  ahead, 
and  the  capital  stock  was,  therefore,  increased  from  $50,000,000  to 


10 

$150,000,000,  exhausting  the  total  national  appropriation.  All  this 
stock  was,  of  course,  owned  by  the  United  States.  Even  this  sum 
proved  to  be  insufficient,  and  it  was  necessary  to  resort  to  outside 
borrowing  in  order  to  take  care  of  the  huge  purchases  of  wheat  and 
flour  which  had  to  be  undertaken  in  order  to  redeem  the  pledge  of  the 
guaranteed  price.  At  one  time  during  the  crop  year  these  borrowings 
amounted  to  the  enormous  total  of  $385,000,000.  No  concern,  how- 
ever great  its  resources  or  whatever  its  prestige  because  of  its  official 
character,  could  have  raised  that  amount  of  money  in  the  open  market 
unless  its  officers  and  its  policies  had  enjoyed  the  confidence  of  the 
business  community  in  the  highest  degree. 

24.  THE  WHEAT  PRICE  GUARANTEE  EXTENDED  TO  1919-20. 
During  the  summer  and  autumn  of   1918  the  United  States  was 

preparing  itself  for  a  long  war.  Huge  enterprises  were  under  way 
for  the  production  of  ships,  guns,  munitions,  and  equipment,  on  a 
gigantic  scale.  Those  most  intimately  informed  believed  that  the  war 
would  probably  be  of  long  duration ;  hence  a  program  of  preparation 
was  laid  out  which  looked  far  ahead.  As  part  of  this  war  program 
the  President,  under  the  authority  of  the  Food  Act  of  August,  1917, 
issued  a  proclamation  on  September  6,  1918,  extending  through  an- 
other crop  year  the  guaranteed  price  of  $2.26  per  bushel.  It  was  felt 
necessary  to  stimulate  to  the  utmost  the  production  of  wheat  and  the 
acreage  sown  that  fall  and  the  next  spring  confirmed  the  stimulative 
effect  of  this  price.  In  fact,  the  large  response  in  wheat  acreage 
tended,  to  menace  properly  balanced  farm  production.  The  country 
needed  corn,  hogs,  beef  cattle,  as  well  as  wheat  and  flour.  But  on 
November  11  came  the  Armistice,  and  with  it  the  virtual  ending  of 
the  war.  Yet  the  nation's  word  was  pledged,  through  the  joint  action 
of  Congress  and  President,  to  the  maintenance  of  the  guaranteed 
wheat  price  up  to  the  end  of  the  1919-20  crop  year,  or  until  June,  1920. 

25.  THE  $1,000,000,000  WHEAT  APPROPRIATION. 

There  was  no  other  course,  consistent  with  honor,  than  to  redeem 
the  pledge  of  the  guarantee.  Hence  a  bill  was  enacted  during  the  clos- 
ing days  of  the  65th  Congress  (approved  March  4,  1919),  making  an 
appropriation  of  $1,000,000,000  for  maintaing  the  wheat  guarantee 
through  the  crop  year  1919-20.  It  was  regarded  at  that  time  as  almost 
inevitable  that  with  the  release  of  the  supplies  accumulated  in  Australia 
and  the  Argentine  and  the  impending  record  crop  to  be  harvested  in 
the  United  States  there  would  be  a  decline  of  the  world  price  for 
wheat  (by  far  the  largest  winter  wheat  acreage  ever  seeded  in  this 
country  was  planted  in  the  fall  of  1918,  with  a  total  of  all  wheat  seeded, 
winter  and  spring  combined,  of  over  73  million  acres).  Hence  in  the 


11 

debates  in  Congress  the  unavoidable  loss  to  the  Treasury  which  would 
follow  through  having  to  make  up  the  difference  between  the  market 
price  and  the  guaranteed  price  was  accepted  as  one  of  the  necessary 
costs  of  the  war,  regrettable  but  none  the  less  inevitable.  These  fears, 
it  may  be  added,  were  shared  by  the  best  informed  opinion  in  the  grain 
trade  and  appeared  to  be  founded  on  the  best  of  premises.  Yet  the 
actual  turn  of  events  nullified  them  completely.  There  was  a  great 
shrinkage  in  the  spring  wheat  crop  of  this  country  during  the  last 
month  before  harvest  and  the  total  outturn  of  both  winter  and  spring 
wheat  did  not  exceed  941  million  bushels,  a  large  crop  but  very  much 
less  than  the  amount  expected  and  not  greatly  over  the  crop  of  1918. 

26.     MOVEMENT  OF  THE  WHEAT  PRICE. 

The  wheat  price  moved  through  a  very  wide  range  during  the  year 
1919;  starting  at  a  few  points  above  the  guaranteed  price  at  the  be- 
ginning of  January  there  was  very  little  change  until  early  in  March, 
but  from  that  point  a  continuous  advance  was  maintained  until  the 
first  week  in  May;  this  advance  coincided  with  the  rapid  exhaustion 
of  the  visible  supply  of  wheat  in  this  country,  which  was  being  used 
up  both  for  the  supply  of  our  own  consumers  and  to  complete  deliv- 
eries upon  the  European  relief  program.  During  May  and  June  the 
price  of  No.  1  Northern  spring  .wheat  declined  to  within  a  few  cents 
of  the  guaranteed  minimum,  but  after  the  short  spring  wheat  harvest 
it  began  to  advance  again  and  in  late  December  it  reached  a  point  over 
$1.00  per  bushel  above  the  guaranteed  minimum  prices  at  some  of  the 
terminal  markets.  The  hard  winter  wheats  of  the  Southwest,  also  in 
short  supply,  reflected  the  same  tendency,  though  not  to  an  equal 
degree.  These  extraordinary  prices  for  the  premium  wheats  were  being 
paid  in  spite  of  the  greatest  aggregate  movement  of  wheat  from  the 
farms  which  this  country  had  ever  known  in  a  similar  period.  During 
the  winter  of  1919-20  several  remarkable  price-making:  factors  were 
in  operation.  Among  them  were:  (1)  totally  inadequate  domestic 
transportation;  (2)  utter  collapse  of  the  foreign  exchanges,  and  the 
consequent  dislocation  of  commodity  movement;  (3)  severe  winter 
weather,  which  greatly  lowered  the  promise  of  the  new  crop.  The 
varying  play  of  these  influences  helps  explain  the  fluctuations  shown  in 
the  attached  table.  Since  December,  1919,  prices  for  the  premium 
grades  have  held  well  above  the  guaranteed  minimum  although  the 
Grain  Corporation  has  been  able  to  buy  certain  qualities  and  varieties, 
not  in  particular  demand  for  the  domestic  trade,  at  the  guaranteed 
price.  Under. these  conditions  it  has  not  yet  been  necessary  to  use  any 
part  of  the  billion  dollar  appropriation  to  make  good  losses  which  might 
have  accrued  to  the  government  through  paying  the  guaranteed  price 
and  then  having  to  resell  the  wheat  at  a  lower  price. 


12 

AVERAGE  OF  HIGH  AND  LOW  PRICES  OF  No.  1  NORTHERN 
SPRING  WHEAT  AT  CHICAGO  ON  FIRST  SATURDAY  OF  EACH 
MONTH,  FROM  JANUARY  4,  1919,  TO  APRIL  3,  1920. 

Date.  Price  per  bu.  Date  Price  per  bu. 


Tan 

4 

1919 

28 

Sept 

6 

1919 

$2 

39 

Feb. 

1 

1919.. 

2 

26  1A 

Oct 

1919 

2 

Mar. 

1, 

1919.  

7 

.28 

Nov. 

1, 

1919  

2 

'6RX' 

Apr. 

1919  

2 

.46^ 

Dec 

1919 

3 

May 

3, 

1919  

? 

83^ 

Tan 

y 

1920 

3 

17V 

T 

June 

7, 

1919  

? 

48 

Feb 

7 

1920 

2 

6Q 

Tilly 

5, 

1919  

2 

.45 

Mar 

6 

1920 

2 

SO 

A 

Aug. 

1919  

? 

.4714 

Apr 

1920 

2 

90 

27.  THE  UNITED  STATES  WHEAT  DIRECTOR  AND  THE  UNITED  STATES 

GRAIN  CORPORATION. 

By  order  of  the  President,  dated  May  14,  1919,  the  Executive  Ad- 
ministration of  the  Wheat  Guarantee  Act  of  March  4  was  vested  in 
Julius  H.  Barnes  as  the  United  States  Wheat  Director.  The  President 
also  directed  that  the  services  of  the  Grain  Corporation  be  used  by 
the  Wheat  Director  as  the  agency  for  the  administration  of  the  Act. 
The  President  further  directed  that  the  name  of  the  Food  Administra- 
tion Grain  Corporation  be  changed  after  June  30,  1919,  to  United  States 
Grain  Corporation  and  that  its  capita^  stock  be  increased  from  $150,- 
000,000  to  $500,000,000. 

28.  THE  PROBLEM  OF  CONTROL  IN  1919-20. 

The  high  prices  for  wheat  and  flour  in  the  fall  and  winter  of  1919 
did  not  seem  to  check  appreciably  the  demand  of  flour  consumers. 
All  war  restrictions  upon  domestic  consumption,  such  as  the  compul- 
sory purchase  of  substitute  flour,  had  long  since  been  removed  and 
the  American  home  market  showed  a  surprisingly  large  capacity  to 
absorb  wheat  flour.  The  output  of  our  flour  mills  since  the  beginning 
of  the  crop  year  1919-20  had  by  March  12,  1920,  exceeded  100  million 
barrels — a  full  month's  production  in  excess  of  the  figure  for  the  cor- 
responding period  last  year.  This  was  not  primarily  an  export  demand ; 
the  exports,  both  of  flour  and  wheat,  from  the  beginning  of  the  crop 
year  have  not  been  over  two-thirds  of  the  movement  for  the  corre- 
sponding period  of  last  year.  Not  only  did  the  American  people  want 
flour  in  apparently  unlimited  quantity,  but  they  insisted  upon  having 
the  high  priced  patent  grades  of  hard  wheat  flour.  This  demand  for 
the  low  extraction  flours,  made  from  that  grade  of  wheat  which  com- 
manded a  premium  because  of  its  scarcity,  carried  prices  up  to  a  point 
approximating  the  panic  prices  of  the  spring  and  summer  of  1917. 


13 

WHOLESALE  AVERAGE  MONTHLY  PRICE  OF  STANDARD  PATENT 
FLOUR  AT   MINNEAPOLIS   IN    1919-1920. 


Month. 

Price  per  bbl. 

Month. 

Price  per  bbl. 

Jan.,     1919... 

.  $10.27 

Sept    1919      

.  $11.62 

Feb      1919  

10  55 

Oct       1919 

12  03 

Mar.,    1919  

11.21 

Nov.,   1919  

12.95 

Apr      1919  

12  21 

Dec      1919 

14  02 

May,    1919 

12  42 

Jan       1920  . 

14  44 

June,    1919  .... 

12  01 

Feb      1920 

.   ..               13  54 

July,     1919  

.  .     .  .        12  16 

Mar     1920 

13  16 

Aug.,   1919  

12  01 

29.     "GRAIN  CORPORATION  FLOUR." 

In  the  face  of  this  situation  the  Grain  Corporation  felt  it  necessary 
to  take  some  steps  to  carry  out  that  purpose  of  the  Wheat  Guarantee 
Act  which  made  it  a  duty  "to  enable  the  people  of  the  United  States 
to  purchase  wheat  products  at  a  reasonable  price."  With  this  end  in 
view  the  Grain  Corporation,  beginning  in  August,  1919,  offered  to  sell 
in  car  lots  to  the  domestic  trade  straight  grades  of  flour  from  its 
export  purchases  of  soft  winter  wheat  flour  at  prices  considerably  below 
those  current  for  the  widely  advertised  and  popular  brands  of  hard 
wheat  flour.  In  December  the  selling  program  was  expanded  so  as 
to  make  straight  soft  wheat  flour  available  to  the  retail  trade  in  appro- 
priate package  sizes  under  the  brand  "United  States  Grain  Corpora- 
tion Standard  Pure  Wheat  Flour."  An  extensive  advertising  campaign 
was  inaugurated  directed  to  the  general '  consuming  public  as  well  as 
to  retailers  and  bakers.  This  straight  grade  flour  Was  not  analogous 
to  the  substitute  flours  or  "Victory"  flour  of  the  war  program,  but 
was  similar  to  the  grades  usually  exported,  and  even  largely  marketed 
in  this  country,  before  the  war.  The  reaction  from  the  restricted  flour 
grades  of  the  war,  however,  coupled  with  the  unparalleled  prosperity 
of  the  wage  earners  seemed  to  stimulate  the  American  people  to  demand 
only  the  high  priced  low  extraction  flours ;  the  Grain  Corporation  found 
it  an  uphill  task  to  educate  the  public  to  an  appreciation  of  the  whole- 
someness  of  straight  flour  and  the  economies  to  be  realized  from  its 
use.  Some  impression  was  made,  of  course,  and  the  consuming  public 
was  given  an  opportunity  to  exercise  its  preference  in  the  purchase  of 
cheaper  grades  of  flour,  if  it  so  desired.  Some  440,000  barrels  of 
straight  flour  were  sold  under  the  Grain  Corporation  brand  up  to  the 
end  of  March.  The  most  significant  result  of  the  campaign,  perhaps, 
was  the  evidence  to  many  mills  that  a  large  section  of  the  community 
desired  straight  grades  of  flour  under  the  mills'  own  brands.  Also  the 
urgent  pressure  of  demand  was  deflected  from  the  hard  wheat  flours, 
in  short  supply,  to  the  soft  wheat  flours,  of  which  there  was  relative 
abundance.  This  resulted  in  more  moderate  prices  for  the  standard 
brands  of  flour. 


14 

30.  REMOVAL  OF  THE  EMBARGO. 

In  July,  1917,  the  President  proclaimed  an  embargo  on  exports  of 
certain  commodities,  including  wheat  and  flour.  By  the  Food  Control 
Act,  and  again  by  the  Wheat  Guarantee  Act,  the  President  was  given 
practically  complete  control  over  imports  of  wheat  and  wheat  products. 
This  control  was  transferred  by  the  President  to  the  Wheat  Director, 
and  on  December  15,  1919,  the  embargo  and  import  restrictions  were 
both  removed  with  a  view  to  preparing  the  way  for  the  ultimate  par- 
ticipation of  individual  enterprise  in  the  export  and  import  business 
in  wheat  and  flour.  It  was  expected  by  some  members  of  the  flour 
trade  that  the  United  States  supply  of  spring  wheat  flours  would 
be  enlarged  by  imports  of  Canadian  wheat  and  flour,  which  could  now 
enter  American  markets  free  of  duty.  Very  little  Canadian  wheat  or 
flour  did,  in  fact,  come  in. 

31.  TRANSPORTATION   DIFFICULTIES. 

The  winter  of  1919-20  was  extraordinary  hard  on  the  railroads. 
Even  with  the  best  of  conditions  the  rail  carriers  would  have  found  it 
difficult  to  cope  with  the  volume  of  traffic  offered,  because  of  their 
inadequate  equipment.  With  the  greatest  of  care  and  energy  this 
could  not  be  otherwise,  when  the  condition  of  our  rail  facilities  is  con- 
sidered. Thus  to  compare  the  equipment  and  performance  of  the 
American  railroads  in  1915  and  1918: 

No.  of  No.  of 

Locomotives.  Freight  Cars.  Tonnage  Moved. 

1915..  65,099  2,356,338  277,135,000,000  tons 

1918 66,010  2,366,658  403,774,000,000  tons 

An  increase  in  tonnage  of  approximately  50  per  cent,  was  carried 
in  1918  with  practically  the  same  facilities  as  in  1915.  In  January, 
i920,  conditions  became  especially  aggravated  with  the  heaviest  freight 
offerings  ever  known  in  mid-winter  coming  at  a  time  of  almost  un- 
precedented weather  severity.  The  reports  of  the  Railroad  Adminis- 
tration for  car  loadings  in  January  show : 

January,    1918 642,016   cars 

January,    1919 726,555    cars 

January,    1920 816,967   cars 

Delays  in  rail  transportation  from  country  points  and  from  termi- 
nals to  mills  have  been  a  very  severe  trade  handicap  this  year  and 
have  undoubtedly  been  responsible  in  part  for  the  bidding  up  of  wheat 
prices  during  the  past  winter  and  the  resulting  mark  up  of  flour  prices. 
Such  delays  and  difficulties  produced  local  scarcities  and  entailed 
extreme  hazard  of  loss  through  fluctuations  in  prices  owing  to  inter- 
ference with  the  smooth  movement  of  traffic  from  one  market  to  an- 


15 

other  and  from  producer  to  consumer.  They  always  result  in  curtailed 
operations  and  necessitate  enlarged  trade  margins. 

32.  GRAIN  CORPORATION  BUYING  RESTRICTS  PRICE  FLUCTUATIONS. 
Had  it  not  been   for  the  knowledge  that  the  Grain  Corporation 

stood  ready  to  buy  every  day  and  every  hour  at  the  guaranteed  prices 
in  the  various  markets  these  fluctuations  in  price  would  unquestion- 
ably have  been  much  greater  and  the  producers  correspondingly  in- 
jured. Of  the  crop  of  1919  alone  the  purchases  of  the  Grain  Cor- 
poration had  up  to  the  middle  of  February  exceeded  185  million 
bushels,  and  during  its  existence  to  March  4,  1920,  its  total  purchases 
at  the  guaranteed  price  amounted  to  the  equivalent  of  705  million 
bushels  of  wheat.  This  enormous  figure  emphasizes  the  extent  to 
which  the  authorized  underlying  security  of  the  producer  has  been 
made  effective.  Had  it  not  been  for  the  buying  of  the  Grain  Corpora- 
tion in  rush  times  the  producer  would  have  had  no  assurance  that  his 
price  would  even  approximate  the  guarantee. 

33.  WHY  FLOUR  AND  BREAD  PRICES  ARE  UP  LESS  THAN  WHEAT. 
There  can  be  no  question  but  that  the  buying  of  the  Grain  Cor- 
poration and  its  arrangements  with  the  country  elevators  and  other 
wheat  buyers  during  this  present  season  to  take  the  producer's  wheat 
at  a  fair  reflection  of  the  guaranteed  price  at  their  nearest  terminal, 
whether  the  railroads  had  cars  available  to  move  the  wheat  or  not,  have 
kept  the  necessary  trade  margins  within  the  narrowest  possible  range. 
This  service  has  benefited  the  producer  and  consumer  alike,  keeping 
up  the  price  to  the  producer  and  reducing  it  to  the  consumer.     This 
shrinkage    of    trade    margins,    with    the    stability    of    the    underlying 
guarantee  which  made  it  possible,  goes  far  to  explain  why  the  farm 
price  of  wheat  at  the  end  of  1919  shows  an  advance  over  1913  of  193 
per  cent.,  while  flour  has  advanced  only  133  per  cent,  at  retail,  and 
bread  only  82  per  cent. 

COMPARISON    OF    RELATIVE    PRICES    OF    WHEAT,    FLOUR    AND 

BREAD,  1913-1919. 

Farm  Price  of  Wheat    Retail  Price  of  Flour    Retail  Price  of  Bread 

Average  for  U.  S.  Average  for  U.  S.        Average  for  U.  S 

Relative  Price  Relative  Price  Relative  Price 


1913  Avge.. 

100 

•\f\f\ 

1914   " 

109 

1UU 

IfM 

100 

1915   " 

142 

19A 

112 

1916   " 

148 

1ZO 
•  i  -jr 

124 

1917   " 

254 

100 
91  1 

130 

1918   " 

.  .  .  .     257 

611 

on  9 

164 

1919   "  .... 
Dec  ,  1919 

271 
293 

£\)j 

218 
9-3-3 

175 

179 

Jan.,  1920  . 

298 

«oo 

9/dC 

182 

£43 

189 

16 

34.  WHAT  TO  DO  WITH  THE  5,000,000  BARRELS  OF  FLOUR? 

As  a  result  of  its  buying  of  flour  from  the  mills  for  export,  and 
to  protect  the  guarantee,  the  Grain  Corporation  has  accumulated  an 
unsold  stock  of  5,000,000  barrels  of  soft  winter  wheat  flour — the  variety 
in  greatest  abundance  on  this  year's  crop.  The  Wheat  Guarantee  Act 
required  that  as  between  the  exports  of  wheat  and  of  flour  the  prefer- 
ence should  be  given  to  flour.  This  was  a  concession  by  Congress  to  the 
demands  of  the  millers,  many  of  whom  felt  aggrieved  at  the  wheat  ex- 
port policy  of  the  Grain  Corporation  during  the  crop  year  1918-19,  in 
spite  of  the  fact  that  the  Grain  Corporation  had  bought  from  them 
nearly  26  million  barrels  of  flour  between  July,  1918,  and  June,  1919. 
The  Grain  Corporation  had  also  bought  nearly  270  million  bushels  of 
wheat  during  the  same  period,  the  greater  part  of  which  was  exported. 
Owing  to  the  demoralized  condition  of  the  foreign  exchange  market 
and  the  extreme  difficulty  of  arranging  credits  the  European  market 
did  not  take  anywhere  near  as  much  of  our  wheat  and  flour  in  1919-20 
as  in  1918-19.  Hence  the  large  stock  of  flour  accumulated  by  the 
Grain  Corporation,  which  until  the  removal  of  the  embargo  in  De- 
cember, 1919,  was  the  sole  agency  for  the  exportation  of  wheat  and 
flour  from  this  country.  Early  in  March,  1920,  Mr.  Barnes  appeared 
before  the  Rules  Committee  of  the  House  of  Representatives,  which 
had  before  it  a  bill  allowing  $50,000,000  for  general  relief,  to  urge 
legislation  endorsing  the  sale  of  these  five  million  barrels  of  flour 
on  credit  to  relieve  starvation  in  Austria,  Poland,  Armenia,  and  other 
stricken  districts.  The  House  acted  favorably  on  this  measure  March 
15  and  the  Senate  one  week  later. 

35.  THE  SHARE  OF  THE  GRAIN  CORPORATION  IN  EUROPEAN  RELIEF. 
From  the  very  beginning  the  Grain  Corporation  has  played  an  im- 
portant part  in  the  whole  problem  of  European  relief.     Not  only  did 
the  Allied  governments  turn  over  to  it  the  entire  purchase  of  cereals 
and  flour  in  this  country  for  their  military  and  civilian  needs,  but  the 
Commission  for  Relief  in  Belgium  early  placed  in  the  hands  of  the 
Grain  Corporation  the  buying  and  shipping  of  food  necessary  for  the 
maintenance  of  supplies  to  the  Belgian  people.    A  similar  service  was 
performed   for  the  United   States  Government  in  the  supply  of  the 
American   Expeditionary  Force.     All   flour  and  cereals   for  overseas 
shipment  were  bought  and  handled  by  the  Grain  Corporation  as  agent 
for  the  Army.    Within  two  weeks  of  the  signing  of  the  Armistice  the 
headquarters  of  the  Food  Administration  were  removed  from  Wash- 
ington to  Paris  where  Mr.  Hoover  at  once  proceeded  in  order  to  formu- 
late definite  plans  to  distribute  food  supplies  to  the  stricken  populations 
of  the  war  districts.    Mr.  Hoover  saw  the  necessity  of  taking  immediate 
action  if  these  people  were  to  be  brought  through  the  winter.     On 


17 

December  23,  1918,  the  President  formally  approved  his  request  that 
the  Grain  Corporation  be  authorized  to  extend  its  sphere  of  operations 
outside  of  United  States  territory  so  that  steps  might  be  taken  to  finance 
the  purchase  and  transport  of  foodstuffs.  On  February  24,  1919,  Con- 
gress passed  a  bill  appropriating  $100,000,000  to  be  used  for  the  pur- 
chase of  foodstuffs  and  other  urgent  supplies  for  European^  relief  out- 
side of  enemy  countries,  and  on  March  1  the  President  appointed  Mr.  > 
Hoover  as  Director-General  of  the  American  Relief  Administration,*" 
which  he  had  already  organized,  to  carry  out  the  purposes  of  the  Act. 
This  agency  soon  developed  into  the  largest  and  busiest  food  distribut- 
ing machine  the  world  had  ever  seen.  The  administration  of  the  $100,- 
000,000  fund  was  of  necessity  merged  with  the  larger  problems  of 
relief  administration  in  general.  Some  sixteen  new  states  had  emerged 
in  central  Europe  from  the  collapse  of  the  old  empires,  most  of  them 
without  sufficient  national  cohesion  to  provide  either  credit  or  the 
means  of  transport  and  distribution  of  necessary  supplies.  Hence  it 
was  imperative  to  organize  and  rehabilitate  practically  the  whole  eco- 
nomic life  of  a  large  part  of  Europe  and  to  co-ordinate  it  with  the 
existing  controls  of  food,  finance,  and  shipping,  of  the  United  States 
and  the  Allies.  Organization  was  effected  by  giving  sweeping  powers 
of  control  over  railways,  coal  mines,  and  telegraphs  to  the  American 
Director-General  of  Relief ;  co-ordination  was  attained  through  rep- 
resentation in  the  newly  created  Supreme  Economic  Council  of  which 
he  was  chairman.  The  broken  down  railroads  were  set  going,  impor- 
tant rivers  reopened  to  traffic,  coal  mining  and  distribution  stimulated, 
some  ten  thousand  miles  of  telegraph  lines  co-ordinated  and  operated 
as  a  single  unit,  and  in  countless  ways  orderly  economic  processes  sub- 
stituted for  the  idleness  and  desolation  caused  by  the  war.  In  the 
nine  months  from  December,  1918,  to  August,  1919,  a  total  of  over 
4,750,000  tons  of  foodstuffs  and  other  supplies,  valued  at  approximately 
$1,147,000,000,  were  distributed  to  twenty-three  countries  in  Europe 
and  Asia  by  this  practical  organization  of  relief.  The  contribution  of 
ihe  United  States  was  some  2,850,000  tons  of  supplies,  of  a  money 
value  of  $720,000,000,  to  say  nothing  of  the  direct  financial  assistance 
extended  to  the  Allied  and  liberated  countries  by  the  Treasury.  The 
special  appropriation  of  $100,000,000  was  applied  in  certain  critical  4 
regions,  notably  in  Poland  and  Armenia.  The  buying  of  -foodstuffs  in 
this  country  for  these  huge  relief  works  was  almost  entirely  performed 
by  the  Grain  Corporation,  as  agent,  of  course,  and  not  out  of  its  own 
funds.  No  finer  example  of  the  practical  altruism  of  the  American 
people  can  be  found  than  this  work  of  relief,  which  was  conducted 
with  a  promptness,  efficiency,  and  resourcefulness  to  win  the  admira- 
tion and  applause  of  the  world. 


18 

36.  GRAIN  CORPORATION  PROFIT  AND  Loss. 

In  spite  of  its  public  character  and  idealistic  aims,  the  operations 
of  the  Grain  Corporation  have  been  conducted  in  a  strictly  businesslike 
manner.  From  September  1,  1917,  to  February  28,  1920,  its  total 
purchases  of  all  kinds  aggregated  $3,674,260,533.12;  and  its  sales  $3,- 
572,672,31^.82.  For  the  same  period  its  total  operating  expenses  were 
$5,735,147.43,  or  almost  exactly  16/100s  of  one  per  cent,  of  sales, 
while  the  net  profits  have  been  in  excess  of  $50,000,000.  Of  this 
amount  approximately  $20,000,000  represents  profits  arising  from 
sales  of  foodstuffs,  chiefly  wheat  and  flour,  to  neutrals  during  the  war 
at  prices  above  the  government  buying  price.  These  neutrals  took 
unconscionably  high  profits  from  their  shipping  business  during  the 
war,  even  upon  the  transport  of  supplies  destined  for  the  use  of  our 
own  Army  abroad,  and  it  was  deemed  nothing  less  than  right  that 
they  should  be  required  to  pay  prices  which  would  return  some  of 
this  profit  to  us.  It  should  be  pointed  out  that  interest  at  the  normal 
commercial  rate  of  5%  on  the  national  capital  employed  by  the  Grain 
Corporation  during  the  thirty  months  from  September,  1917,  to  Feb- 
ruary, 1920,  would  have  amounted  to  over  $26,000,000.  This  accounts 
for  more  than  half  the  total  profits. 

37.  BETTER  THRESHING  METHODS. 

No  discussion  of  the  Grain  Corporation's  activities  would  be  com- 
plete without  some  reference  to  its  highly  successful  efforts  to  prevent 
loss  of  wheat  in  two  neglected  but  important  fields.  The  first  of  these 
was  a  campaign  of  instruction  in  better  threshing  methods.  A  thresh- 
ing division  was  organized  in  April,  1918,  and  county  committees  were 
appointed  by  Federal  Food  Administrators  in  approximately  1,000 
wheat  producing  counties  in  thirty-two  states.  Through  these  com- 
mittees expert  threshermen  in  the  employ  of  the  Grain  Threshing  Divi- 
sion, together  with  manufacturers'  field  experts,  were  sent  out  to  obtain 
direct  contact  with  threshing  machines  while  in  operation.  It  was 
developed  that  many  threshing  machines  were  not  properly  adjusted 
or  operated,  but  these  experts  made  suggestions  regarding  machine 
adjustments  and  various  devices  for  improved  methods  which  resulted 
in  the  saving  to  the  producers,  according  to  reliable  estimate,  of  30 
million  bushels  of  'wheat,  valued  at  approximately  $60,000,000.  This 
saving  to  the  producers  was  achieved  at  an  expense  to  the  Grain  Cor- 
poration of  only  about  $60,000. 

38.  GRAIN  DUST  EXPLOSIONS. 

One  of  the  most  baffling  and  yet  unnecessary  sources  of  loss  to  the 
community  has  been  the  explosions  of  dust  in  mills  and  elevators, 


19 

which  have  sometimes  caused  fearful  loss  of  life  as  well  as  property. 
The  causes  of  dust  explosions  had  very  generally  been  regarded  as 
too  obscure  to  be  guarded  against,  but  the  scientists  of  the  Department 
of  Agriculture  did  not  take  this  view.  From  December  of  1917  the 
Grain  Corporation,  first  in  conjunction  with  the  Department  of  Agri- 
culture, and  since  July  1,  1919,  at  its  own  expense,  kept  in  the  field 
a  corps  of  experts  on  fire  and  dust  explosions.  These  experts  have 
inspected  properties  in  all  grain  centers  and  demonstrated  methods  to 
warehousemen  to  eliminate  fire  and  dust  hazards.  The  benefit  of  this 
educational  work  cannot  be  measured,  but  some  idea  of  its  value  may 
be  appreciated  from  the  fact  that  while  the  cost  of  this  service  was 
almost  negligible  the  Grain  Corporation  lost  less  than  $30,000  in  the 
one  single  explosion  which  occurred  during  the  thirty-one  months  end- 
ing with  March,  1920,  although  it  has  had  as  high  as  $500,000,000 
worth  of  property  at  one  time  exposed  in  the  various  warehouses  of 
the  country  under  the  exceptionally  hazardous  conditions  of  war.  The 
educational  work  of  the  fire  and  dust  explosion  prevention  campaign, 
together  with  the  experience  and  care  and  energy  of  the  practical 
grain  men  in  charge  of  the  various  zone  offices  of  the  Grain  Corpora- 
tion, is  the  explanation  of  this  immunity  from  loss.  Fire  insurance 
premiums  on  this  property  at  commercial  rates  would  have  exceeded 
two  million  dollars ;  this  is  the  least  measure  of  the  saving  effected. 


THE    SEVENTH 


OVERDUE. 


LD  2l-95m-7,'37 


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